Commission Impossible? - Shaping places through strategic commissioning Dr Laura White Edited by Tom Shakespeare With foreword by Rt Hon Hazel ...
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Commission Impossible?
Shaping places through strategic commissioning
Dr Laura White
Edited by Tom Shakespeare
With foreword by Rt Hon Hazel Blears MP
www.localis.org.ukAbout Localis Who we are Who we are Localis is an independent think-tank dedicated to issues related to local government and localism.We carry out innovative research, hold a calendar of events and facilitate an ever growing network of members to stimulate and challenge the current orthodoxy of the governance of the UK. Our philosophy We believe in a greater devolution of power to the local level. Decisions should be made by those most closely affected, and they should be accountable to the people which they serve. Services should be delivered effectively. People should be given a greater choice of services and the means to influence the ways in which these are delivered. What we do Localis aims to provide a link between local government and the key figures in business, academia, the third sector, parliament and the media.We aim to influence the debate on localism, providing innovative and fresh thinking on all areas which local government is concerned with.We have a broad events programme, including roundtable discussions, publication launches and an extensive party conference programme. Find out more Please either email info@localis.org.uk or call 0207 340 2660 and we will be pleased to tell you more about the range of services which we offer. You can also sign up for updates or register your interest on our website.
1
About Mears
Mears is the UK’s leading provider of social housing maintenance and care
services. More than 13,000 people work at Mears and every year we are
welcomed into the homes of over 500,000 people.
Mears working in partnership
Mears continually looks for ways to drive service improvements. We do this
in partnership with local authorities, housing associations, health authorities,
charities, local communities and individuals. We use our experiences to invest
in innovations that secure long-term outcomes rather than short-term targets.
Why is Mears supporting this publication?
Commissioning has a vital role to play in improving the quality of life for groups
and individuals which is why we welcomed the opportunity to support Localis
and Essex County Council in delivering this timely and valuable report.
To find our more please contact:
Abigail Lock
Head of External Relations (Interim)
pr@mearsgroup.co.uk
0780 8647836
www.mearsgroup.co.uk2
Contents
Acknowledgements 3
Foreword by Rt Hon Hazel Blears MP 4
Executive Summary 6
Introduction 10
1 What is Strategic Commissioning? 12
2 Approaches to Strategic Commissioning 24
3 What Does a Strategic Commissioning Council
Look Like? 38
Conclusion 45
Appendix 48
Bibliography 533
Acknowledgements
This project was led by Dr Laura White, Policy & Strategy Officer at Essex
County Council and edited by Tom Shakespeare, Director of Policy and
Research at Localis.
We would like to thank numerous others from Essex County Council, Mears
and Localis who contributed to the research and drafting at all stages. Finally,
we would also like to acknowledge the input and insight of the following
individuals throughout the research and consultation, although this list is by
no means exhaustive: Laurence Ainsworth (Chester West & Cheshire Council),
Louise Beatty (Cabinet Office), Ian Campbell (Wakefield Council), Cllr Paul
Carter (Kent County Council), Justin Griggs (NALC), Paul Jenner (3SC), Cllr
Mike Jones (Chester West & Cheshire Council), Emma Jupp (Age UK), Henry
Kippin (2020 Public Services Hub), Ian Lewis (Hackney Council) , Gordon
Murray, Kate Mulley (Action for Children), John O’Brien (London Councils),
Helen Randall (Towers and Hamlins), Cllr Steve Reed (Lambeth Council), Steve
Spiers (South Gloucestershire Council), John Tizard (LGIU), Nicholas Webb
(Camden Council).4
Foreword by
Rt Hon Hazel Blears MP
Councils have sometimes struggled with competing priorities when trying to
strategically commission services and in the past have perhaps been too keen to
rely on a small number of commissioning models that have arisen from political
instead of practical concerns.
These two somewhat stylised models have inherent flaws. The Nicholas Ridley
manifestation of hands-off government encouraged councils to act as holding
companies, meeting once a year to award contracts to private companies and
focusing solely on economic value and the bottom line. On the other hand, the
classic statist model, which some councils have used to provide all services from
leisure centres to adoption services, delivered a controlling model that lacked
personalisation and overlooked community involvement.
The challenge for councils is to find a middle way between these extremes
– finding new relevant models that can effectively and efficiently commission
services that achieve good value. By highlighting some of the innovative
examples of strategic commissioning from across the country, this timely report
offers an extremely useful contribution to the debate about the future of local
services.
The report specifically refers to the London Borough of Lambeth and the co-
operative council model that is being pioneered by Cllr Steve Reed. It is
empowering local residents, community groups and mutuals to shape and
take control of their local services, embracing and using local knowledge to
commission services that really work.
There is real innovation going on in my own constituency too. Salford Council’s
‘Unlimited Potential’ is a social enterprise that employs more than 40 people
working on health projects commissioned by the council and in partnership
with the NHS targeted at those most in need of support, and this year will be
reinvesting their surplus back into the local community though an Innovation
Fund, helping local people to help themselves
As these examples and the report shows, councils are taking different
approaches to tackle the variety of challenges that their areas face. The reason
that these have been successful is because they represent a break from stale
models of the past and show how commissioning can be developed to localise
and personalise services.5
The challenge for local councils is to determine what exactly they want to achieve,
and then how best to commission to implement their strategic goals. This will
differ from place to place and each council’s aims should reflect the needs and
aspirations of their local community with renewed focus on accountability.
People need to know who is responsible for the services they use, and it is the
role of councils to ensure adequate and improving service provision, but this
can only reflect what local people want if they feel engaged in the process.
Much of this relies on a redefinition of the interaction between citizen and state
and moves away from contracted transactions to a relationship placing both on
a more equal footing.
By commissioning more effectively and collectively not only will councils benefit
from greater efficiencies that will allow savings to be made in a difficult financial
climate, but working with local people and giving them greater involvement
and responsibility over the way that their money is being spent will bring
together service providers and service users in partnership to drive continual
improvement.
The report’s conclusions are relevant for central government and councils of all
political persuasions, and will undoubtedly become increasingly pertinent in the
years ahead.
Foreword6
Executive Summary
The time is right for councils to radically rethink how services are delivered
The role of councils is changing in the face of economic pressures and the
Government’s plans to decentralise power from Whitehall to local government
and beyond. This report suggests that councils have a once in a generation
opportunity to cement their position of enhanced power by taking a ‘strategic
commissioning’ approach to the delivery of local services.
Strategic commissioning, defined broadly as: “the process of identifying needs
within the population and developing policy direction/service models and the
market to meet those needs in the most appropriate and cost effective way”,1
offers opportunities for councils to better fulfil their role as ‘place-shapers’ of
their local areas. The commissioning process is best visualised as a back-and-
forth ‘steering wheel’ motion between need assessment, the market, resources
and delivery, rather than the typically cyclical model used at present. This
places a particular emphasis on a continuous dialogue between various
bodies.
Local strategic commissioning involves a move away from an outdated focus
on cost which dominated the Compulsory Competitive Tendering (CCT) era of
the 1980s, through to the centralised ‘best value’ regime which dominated the
Government’s approach to local government over the last decade, towards a
more localist understanding of ‘value’.
Councils have already recognised the importance of strategic commissioning,
and 81% of council leaders and chief executives surveyed for this report say
they are considering taking on an even greater strategic commissioning role in
the near future.2 In this report, we take the position that strategic commissioning
should be ‘provider neutral’, focusing on local need and the best pathways
to deliver that need. The public, after all, prioritise an effective public service
above and beyond who provides that service.
Strategic commissioning offers substantial benefits for councils
and local residents
By focusing on what is most important for local residents, strategic commissioning
can result in a wide range of benefits, including:
• Greater efficiency – The commissioning process opens up new possibilities
to deliver services in more efficient ways, as well as opportunities to take
advantage of initiatives such as pooled budgets and early intervention
investment (eg social impact bonds) to deliver long-term value for money for
1N
ational Procurement Strategy, in
ECC (2010) ‘Procurement Strategy: council-tax payers.
2011/12-2013/14’, p.6. • A focus on outcomes, not processes – By studying the needs of local residents,
2 Localis survey – see Appendix and by measuring the long term local ‘value’ of particular services, councils7
can ensure the provision of services which deliver the most important
outcomes for residents – improving lives, not ticking boxes.
• Stimulating local enterprise – By taking a comprehensive strategic
commissioning approach, councils could leverage their significant resources
and significant buying power to create new markets in the provision of
services, which could create new jobs and growth, as well as the potential
to drive competition, choice and innovation in local services.
• Focus on what is strategically important – By ‘externalising’ the provision of
services, there may be opportunities to resolve any conflict in the council’s role
as both commissioner and provider of services. More specifically, councillors
may be able to take a more strategic approach by focusing solely on the
commissioning and scrutiny of services rather than the day-to-day provision.
Most councils predict a shift in service provision from in-house to voluntary
organisations (82%), public sector shared initiatives (80%), SMEs (75%) and
large private organisations (68%), with only 5% of councils saying that more
services will be delivered in-house.
Some councils are already looking at innovative ways to deliver better services
Some councils are already using, or plan to use, innovative approaches to
deliver on their strategic commissioning plans, including outcomes focussed
contracts (97%), pooled budgets (86%), flexible contracts (84%), payment
by results (78%) and social return on investment models (53%). A handful of
councils have already made significant steps towards becoming wholesale
strategic commissioners of local services. These include:
• Mears and Hertfordshire County Council – This is a joint initiative between
a private company and a local authority to implement a payment-by-results
model for reducing contact time, promoting independence and improving
outcomes for users of a ‘Telecare’, enabling people to manage their long
term health conditions whilst living independently. This way, there is an
incentive for the provider to ‘perform’ and for both the provider and council
to make financial savings
• London Borough of Lambeth – The co-operative council, as trialled by
Lambeth, is an innovative model which aims to involve local residents in
co-producing and co-commissioning their services and pooling personal
resources to create micro-mutuals. The council remains at the core of the
commissioning process, adopting a facilitating role. Councillors and officers
will retain their responsibility for safeguarding and scrutiny, but will also
effectively take on the role of community organisers.
• Essex County Council – By providing customer-centric ‘trip-advisor’ style
performance data ‘Essex Assist’ on their local care services, ECC have
created a platform from which will promote good quality service providers
and drive up standards .They have also set up a social care trading company
‘Essex Cares’ which has helped to redefine the relationship between staff
and customers by empowering staff. This has led to ‘Essex Cares’ achieving
a 99% user satisfaction rating.
• Selby District Council – Selby are one of a number of councils taking steps
to decouple the council’s decision making function from the provision of
services by creating a new service delivery vehicle ‘Access Selby’, which
may involve a mixture of private, public and third sector ownership.
There are barriers to achieving the strategic commissioning approach
Despite the steps taken by of a number of councils, there remain a number of
barriers to the sector-wide implementation of a wholesale strategic commissioning
approach. These include:
Executive Summary8
• Barriers to innovation – One of the biggest barriers to innovation is the
limited market and the limited engagement between the public sector and
providers. However, despite this, councils were optimistic that opportunities
would be given for external organisations to enter the market in the future,
with approximately 80% saying that more contracts would be given to
voluntary and community sector (VCS) and small and medium enterprises
(SMEs), and 68% to larger companies. In addition, risk is so narrowly
defined, and the political dimension of commissioning is shied away from,
particularly in times of austerity. It is important not just to recognise that
commissioning is about political decisions, priorities and fundamentals, but
to positively embrace this.3
• Contractual barriers – There is a residual fear that by taking a more
strategic commissioning approach, councils will lose sovereignty over
service provision. Whilst opportunities exist to break-up, adjust the length
or renegotiate contracts, there still seems to be a degree of rigidity in local
government. For example, a 2008 Ipsos MORI survey noted that 66% of
the sampled PFI contract managers devoted less than half of their time to
managing the contract; it also noted that 42% of the contracts sampled had
failed to levy any performance deductions in the past 12 months. These two
statistics point to the crux of the problem; contract management is woefully
under-resourced and contract managers are often unaware of their rights
under the contract or how to enforce them.
• Information barriers – Another major barrier is the lack of relevant information
to make informed commissioning decisions. For example, 75% of councils
surveyed thought that the availability of clearer national benchmarking data
on provider performance would help with the commissioning process, and
90% thought that there were barriers around sharing data. Internal council
communication between officers and members, and between departments
was also cited as a barrier.
• Cultural barriers – Few councils have any real confidence that strategic
commissioning can take place without a significant shift in culture towards
a less siloed approach to the delivery of services, with councillors taking on
greater roles as community advocates and scrutinisers of performance. In
our survey 91% of councils said that culture was a barrier to a more strategic
commissioning approach, 65% said that the internal council structure was a
barrier to strategic commissioning and 88% thought that the role of elected
members would need to change. Furthermore, 70% said they needed more
commissioning experts in order to make the transition.
• Barriers to joint working – There was an almost unanimous view (91%)
that councils should take the lead on the strategic commissioning of local
services across the public sector. Yet despite this, 70% thought that national
structures were a barrier and 97% said there were challenges around
reforming the siloed nature of budgets. Much emphasis has been placed
on rhetorical partnership working but within the constraints of individual
budgets, practical progress in terms of holistic and whole life provision can
be limited. Within the council itself, there is a siloed separation of subject
matter experts, commissioners, procurement managers and corporate policy
and high-level priority setting.
• Capturing and measuring value for users and communities – This is a challenge
both in terms of practical application and measurement and assessment. There
have been many efforts to develop models to do measure value, but as yet,
there has been limited progress in finding workable solutions. In the absence
of being able to definitively measure social return, a focus on outcomes (be
that contractually or otherwise) is one answer, and this is gaining credence
3S
ee, for example, Unison, APSE & nationally. However, these practices are currently very sporadic, and in many
LGIU (2011) Think Twice. cases products are commissioned rather than services.
www.localis.org.uk9
This report makes a number of recommendations for central and
local government
The report draws out a number of lessons, including a number of recommendations
for central and local government, under nine broad themes:
• Address siloed nature of public services – Central Government should offer
continued support and resources for pooling budgets, data sharing across
the public sector and giving councils greater financial flexibility to better
reflect the long-term nature of investments in early intervention initiatives.
Health and Wellbeing boards should also be given ‘teeth’ to enable effective
partnership commissioning.
• Focus on outcomes not processes – Central Government should promote
national availability of benchmarking data on provider performance to
enable commissioners to make informed decisions. Councils should be
open minded about methods for achieving savings before moving to tender
eg new providers, local authority trading companies (LATCs), support for
Voluntary and Community Sector (VCS) or shared services.
• Support a thriving market for all sectors – Central Government should
support councils in trying to evidence social return. Councils should adopt
various mechanisms to improve service design and procurement – including
exploring innovative methods for supporting market and building capacity
for VCS and SMEs before reaching procurement stages, and should look to
utilise innovative funding models to revolutionise the way that services are
delivered.
• Redefine risk – Councils should work with partners to redefine risk, internally
and externally, to ensure that money is spent on services which deliver the
long term outcomes. They should amend SME risk categorisations so that
small stable and profitable businesses that are high risk due to their size in
relation to the contract value can still be awarded suitable contracts.
• Create smarter, more flexible contracts – Councils should capitalise more on
opportunities to value test and re-negotiate their contracts.
• Redefine the roles and responsibilities of councillors and officers – Councils
should support elected members to take on a greater role as community
advocates and actively encourage members to take up scrutiny roles.
They should embrace the culture change towards becoming strategic
commissioners through officer and member training.
• Make commissioning distinct from procurement and outsourcing – Councils
should move from transactional to transformational savings, and work
collectively to promote a clear vision of what commissioning means,
including how this is distinct from outsourcing.
• Work towards a new, more localist, understanding of value – Councils
should continue to develop their own measures of local ‘value’, working
together with other councils to compare and benchmark performance.
• Involve communities in the commissioning process – Councils should give
greater focus to how communities and providers can be involved in the
commissioning process and priority setting, and should encourage and
enable residents to share information and intelligence on their experiences
of services, using the feedback of others to inform choices.
Executive Summary10
Introduction
‘Strategic commissioning’ has been a popular idea in local government for many
years. Whilst very few authorities would claim that it is an approach which is
applied consistently across all service areas (only 7% of councils surveyed said
their services were ‘mainly outsourced’), and the precise terminology differs in
various political contexts, the aspiration of more effective and joined-up service
design and delivery is widespread. While councils already deliver a wide
range of services, from social care to waste management and from leisure
facilities to local schools, the Government’s forthcoming public service reforms
will make this aspiration even more imperative at the local level, and local
government will have a crucial role to play.
Although touching on procurement and contracting issues, this report
purposefully does not make prescriptions regarding the type of service that
should be commissioned or most suitable providers for any particular service.
This is because, as will become clear, strategic commissioning necessitates a
willingness to look at how things can be done differently and innovatively, in
some cases moving beyond traditional mechanisms of council provision. This
report does also not claim that there is a one size fits all solution for strategic
commissioning, and a structure that works for one locality may be very different
to a successful one elsewhere.
Of course there have been examinations of strategic commissioning in the past,
and the analysis which follows will build on this canon of research. At a time
of intense deliberation about the future of public services, it is now more vital
than ever that councils consider how strategic commissioning could play a role
in shaping their localities. This report explores the different contexts behind
commissioning and provision and considers how council structures, officers
and members, in collaboration with local residents, can promote best practice
across local government.
The landscape for public services is changing in the face of both economic
pressures, and new emerging approaches to addressing local need. The role of
local government therefore is also quickly evolving as locally-devolved decision
making, choice and personalisation become the norm within a broader agenda
for public service reform. The time is clearly right for the strategic commissioning
council, with over 80% of local authorities set to take on this role in the short-
to-medium term.4
4A
ccording to a survey of over 100 This report will therefore explore a range of thorny issues relating to the
councils conducted by Localis. See
‘A Note on Methodology’ and
implementation of a more strategic commissioning approach in local
Appendix A. government. The report is divided into three main sections:11
• Part One – What is Strategic Commissioning? The first section draws
together relevant literature with qualitative and quantitative evidence to
provide a detailed context to the commissioning debate. It traces the history
of commissioning from Compulsory Competitive Tendering in the 1980s
through to the Best Value years and emerging calls for a better focus on
outcomes.
• Part Two – Approaches to Strategic Commissioning. There are many barriers
– bureaucratic, financial, technical and specific – which arise in the standard
commissioning process. This section addresses the procedural barriers to
strategic commissioning, explores innovative approaches and highlights
the key features and outcomes of good commissioning. The issues include
the need for greater innovation in contracting and delivery, the importance
of understanding value and commissioning for outcomes not processes the
development of local markets, and intelligent procurement.
• Part Three – What Does a Strategic Commissioning Council Look Like?
Drawing together the above discussions, this section focuses on the structural
barriers to strategic commissioning, and reveals paths to improvement. It
explores how councils are evolving (and need to evolve) in order to facilitate
more strategic commissioning. As will be illustrated, councils across the
country are already making strides here, but this section will highlight the
ongoing need for less siloed council and public sector structures, as well as
the potential for councils to embrace the emerging roles and responsibilities
for officers and members as part of a new conception of accountability.
If the shift towards the commissioning of public services is to be truly
transformational in terms of quality, efficiency and efficacy, then it is crucial that
these barriers to commissioning strategically are overcome.
A Note on Methodology
The research which informed this report has been largely qualitative in nature.
The methods employed have included semi-structured interviews and participant
observation (through a private roundtable discussion). There has also been
extensive consultation at all stages with commissioners, academics, private and
voluntary sector providers, and commentators. This information has also been
supplemented by quantitative data obtained through a survey which explored
the theme of strategic commissioning. A questionnaire was sent to every council
in England of whom 105 responded to questions on a range of topics from
decision making processes to the delivery of services. Respondents came from
various council types, and were based in all parts of England. The results of this
survey are included in Appendix A.
The focus of the report has been on current developments relevant to strategic
commissioning and it is important to note that the models and case studies
discussed throughout are about emerging innovations to address the issues
identified, and as such do not necessarily focus on presenting results or findings.
Introduction12
1. What is Strategic
Commissioning?
The term commissioning has long been common currency in both local and
national government, and has started to be discussed more widely in the public
arena, in light of the proposed reforms to the NHS. However, there is still
a good deal of confusion as to what commissioning really means, how it is
distinct from procurement, and to what extent councils can truly be said to be
‘commissioning’, even where they are purchasing or ‘procuring’ a wide range
of services from external providers.
Commissioning should in essence be ‘provider neutral,’5 focusing on local need
and the best pathways to deliver that need. With this in mind, commissioners
may pursue any one of a number of options including procurement from public
sector partners, private sector or third sector supply, or in-house delivery where
capacity exits. In practice then, it could also result in the adoption of a wide
variety of mechanisms: contracts, grants, shared services, local authority trading
companies or even asset transfer. At present, outsourcing itself represents only
about a fifth of total UK government expenditure.6 Provision is largely mixed
across councils in the UK with analysis from our survey revealing that around
60% of commissioners would describe the mix of provision in their council as
‘fairly even’, with only 7% describing services as ‘mainly outsourced’.7
Since 2006 the Cabinet Office has defined commissioning as ‘the cycle of
assessing the needs of people in an area, designing and then achieving
appropriate outcomes. The service may be delivered by the public, private
5U
nison, APSE & LGIU (2011) Think or civil society sectors’.8 It is worth noting however that within councils,
Twice: The Role of Elected Members
in Commissioning (London: Unison, procurement, which is one means of implementing commissioning, may adopt
APSE & LGIU). very similar definitions. For instance, the definition set out in the National
6 Jameson, H (2011) Ensuring High Procurement Strategy – the DCLG’s guidance on procurement practice in local
Quality Public Services: recognising
government – is as follows:
the role of the workforce in the future
of outsourcing (London: IPA)
7 Localis Survey (June, 2011), see ‘Procurement is the process of acquiring goods, works and services, covering
Appendix A. both acquisitions from third parties and from in-house providers. The process
8C
abinet Office (2010) Modernising spans the whole life-cycle from identification of need, through to end of a
Commissioning: Increasing the Role
services contract or the end of the useful life of an asset.’9
of Charities, Social Enterprises,
Mutuals and Cooperatives in Public
Service Delivery, accessed at www. This compares, for example, to the following typical council definition of
cabinetoffice.gov.uk [19/04/11],
commissioning, which has many similarities:
p.7.
9N
ational Procurement Strategy, in
ECC (2010) ‘Procurement Strategy: ‘Commissioning is the process of identifying needs within the population
2011/12-2013/14’, p.5. and developing policy direction/service models and the market to meet
10 Ibid., p.6. those needs in the most appropriate and cost effective way’.1013
As these definitions make clear, there are significant overlaps between elements
of procurement and commissioning, rendering close working relationships and
formal mechanisms of interaction between procurement and commissioning
functions essential. However it is also perhaps not surprising that, as research
suggests, some officers and providers struggle to make the distinction between
procurement and commissioning, a pattern which also became evident in the
fieldwork for this study.11 Moreover, it is particularly problematic if procurement is
simply categorised as the business-end of transactions, where efficiency savings
are to be made, with little consideration of how these processes of designing
appropriate tenders to meet prescribed budgets, actually relates to broader
strategic aims. In addition, the National Audit Office (NAO) has been careful to
outline the distinction between ‘cuts-driven’ and ‘intelligent decommissioning’; a
distinction which will become increasingly pertinent as more and more councils
adopt a commissioning approach against a backdrop of tightening budgets.12
Place-Shaping
Crucial to the concept of strategic commissioning is a strong consideration
of how services interact with the locality more broadly. In 2006, the Local
Government White Paper set out the importance of partnership working at the
local level, and the importance of local government as a strategic leader and
‘place shaper’. The two key tenets of this new place-shaping role were the Local
Strategic Partnerships (LSPs) and the Local Area Agreements (LAAs).13 The LSPs
represented the ‘overarching strategic partnership for an area’ and the LAAs
were introduced in 2006 as a statutory requirement for county and unitary
partners to prepare a ‘delivery plan for the strategy’, in consultation with LSP
partners.14
Against the back-drop of an increasingly centralised approach to local co-
ordination, the importance of the unique role of the local authority as a place
shaper was also highlighted during the Lyons Inquiry (2006 – 2007), which
promoted a ‘wider strategic role for local government’ and the ‘creative use of 11 See, for example, Murray (2009)
powers and influence to promote the general well-being of community and its ‘Towards a Common Understanding
citizens’.15 of the Differences Between
Purchasing, Procurement and
Commissioning in the UK Public
In 2007 Lyons set out the key responsibilities for a local authority as a ‘place Sector’, in Journal of Purchasing &
shaper’ as follows: Supply Management, 15, pp.198-
202.
12 For more detail on this see National
• to exercise leadership in the joining up of resources and activities to ensure Audit Office (2011) ‘What
that community interest is reflected in public services. Decommissioning is Not’, www.
• to use their purchasing power to shape the market and facilitate greater user nao.org.uk [19/08/11]
engagement with service delivery. 13 The LSPs had already established in
2000 to oversee the spending of
the Neighbourhood Renewal Funds
These features remain crucial to understanding the role of the council as a 14 DCLG (2006) Strong and
strategic commissioner. Lyons also emphasised that LAAs should be ‘developed Prosperous Communities: The
in a way which leaves enough space for local priorities’, as well as the significant Local Government White Paper,
accessed at http://www.
barrier presented by the inflexible funding system for local government.16 This communities.gov.uk/documents/
included a recommendation to establish outcomes-focused targets for the LAA. localgovernment [20/04/11]
Outcomes are defined as ‘the changes that occur for stakeholders as a result of 15 Lyons, M (2007) Lyons Inquiry into
the activity’.17 Local Government. Place-shaping:
A Shared Ambition for the Future
of Local Government, accessed at
Where does Strategic Commissioning fit in? http://www.lyonsinquiry.org.uk/
Despite various attempts to define ‘strategic commissioning’, it remains highly [06/04/11]
contested. The idea of taking a more strategic approach to commissioning has 16 Ibid., p.18.
emerged as part of the general trend towards exploring greater opportunities 17 Cumming, L.M. & Dick, A., Filkem,
G. &Sturgess, G.L. (2009) Better
for outsourcing to the private sector and has therefore often been used, or Outcomes (London: 2020 Public
perceived as, shorthand for ‘efficiently outsourcing in all possible service areas’. Services Trust), p.19.
What is Strategic Commissioning?14
As a consequence, the truly provider neutral implications of the concept have,
we believe, not been sufficiently debated to date.
It is necessary then to determine what ‘strategic commissioning’ really means
in the context of the broader definition of commissioning and commissioners,
as set out above. To do this it is helpful to start with a simple definition. The
Oxford English Dictionary defines strategic as: 1 relating to the identification of
long-term or overall aims and interests and the means of achieving them; or 2
designed or planned to serve a particular purpose. You can only be strategic
then in the pursuit of specified aims, interests and purpose.
With this in mind, we need to consider what it might mean to act ‘strategically’
in the process of weighing up need, outcomes and cost. Since the purpose of
local government is to serve the community it represents, the key strategic role
for councils is to facilitate an approach to fulfil the needs and requirements of
that community and to act as a ‘place shaper’ in order to sustain this approach
in the long term.
Who/What is a Commissioner?
Central to the definition of commissioning, although often ignored, is the
question of who/what is a commissioner? Interview responses showed a
variety of interpretations of commissioning, strategic commissioning and who
is the commissioner. Many, as is to be expected, used commissioning and
procurement as virtually synonymous. Most talked only about commissioning
as a centralised vehicle for outsourcing services (or investing externally) to the
private or voluntary and community sector (VCS). However, at the same time
it is evident that there is also a real awakening to the role of individuals and
communities as commissioners. There is currently a good deal of interesting
work encouraging us to think differently about who should take the lead in the
design, delivery and assessment of public services, looking at the role of co-
production, and social productivity for example.18 These sentiments, although
not always expressed in these particular terms, were also reflected in the aims
and aspirations of many of the people who contributed to this research.
Therefore, commissioners need not be just councils as organisations, but might
also be individuals, communities or councillors themselves. And commissioning
starts with the democratic process. So ‘strategic’ commissioning is therefore
not just about decisions made by key individuals but about how priorities are
shaped and pursued, and how outcomes delivered for residents. Discussing
commissioners in this much broader way helps us to take a step back from some
of the more entrenched practices within elements, particularly procurement, of
the commissioning process.
Another challenging issue related to the question of ‘who commissions?’ is
the extent to which councils can be both commissioners and providers. At the
heart of the debate is to what extent innovation and insight is really captured
18 O
n co-production, see, for from the very beginning of the commissioning process – that is, developing
example, Boyle, D., Slay, J. &
Stephens, L. (2010) Public Services and setting priorities, analysing need and designing services, as well as giving
Inside Out: Putting co-production providers more opportunity to feed into procurement processes and tenders.
into practice (London: Nef & Within councils however, there are still question marks over the extent to which
NESTA). On social productivity,
see, for example, 2020 Public the provision of services interferes with strategic commissioning process, or
Services Hub & LSIS (2011) The whether the ‘externalisation’ of provision might enable councillors to take a
Further Education and Skills Sector more strategic, ‘place-shaping’ approach. This report attempts to consider
in 2020: A social productivity
approach, accessed at www. all of these complexities in the discussion of strategic commissioning which
thersa.org [30/05/11] follows.
www.localis.org.uk15
Visualising Strategic Commissioning
The commissioning process should be one which spans the breadth of the
council and begins at the very top of the decision making structure and at the
very grassroots simultaneously. In this way, the commissioning process should
begin and end with the councillor’s democratic relationship with residents.
There are a number of key features of commissioning as captured in the below
Cabinet Office cycle.19
1. Assessing needs
2. Identifying priority needs and outcomes
3. Designing the specification which will achieve these outcomes
4. Sourcing the providers to meet this specification
5. Managing the delivery of the outcomes
6. Monitoring, reviewing and learning from delivery to inform future
commissioning
The commissioning process is usually described as a cycle because the above
stages are ongoing, and interrelated. In fact, a standard cyclical representation
probably doesn’t go far enough – it might be more helpful to visualise the
process as a steering wheel, because it is important to understand that the
different stages are inherently indistinct and will happen in no particular order,
and often simultaneously. The stages of the process go back and forth, rather
than consecutively. With this in mind, the below diagram is particularly helpful.
Figure 1
Strategic Commissioning Process operates as a Steering Wheel and Moves Back
and Forth – it is not Cyclical
Gaining top level
multi-agency engagement
and sign up
Assessing needs and
Monitoring, reviewing and
mapping the market
learning from delivery and
performance to inform
future commissioning Ensuring the involvement of
service users and customers
as co-developers of services
Managing contacts
and the delivery of Aligning with the
the impacts and results national drivers
Multi-agency
Commissioning
Sourcing the providers Process
Identifying the priority
to meet the specification needs and impacts
Designing the specification Identifying the full breadth
that will achieve greatest impact of available multi-agency and
community resources
Managing the market and
building capacity
Synthesis analysis
Ensuring effectiveness and
efficiency decommissioning,
reshaping andservice design
19 Cabinet Office (2010),
Source: Essex County Council Modernising Commissioning,
p.7-8.
What is Strategic Commissioning?16
This is an excellent representation of the many complex facets of effective
commissioning. Of note in particular for the discussion which follows is the
‘synthesis analysis’ which is the process by which an understanding of need,
the market and ongoing effectiveness are reconciled with an appreciation of
the available resources.
Key Lessons
• It is important to break down misconceptions around commissioning as
this can create a barrier both within and outside councils – small providers
in particular cannot engage with the process if they do not have proper
understanding of those processes (see Murray, 2011).
• Within councils opportunities for procurement and directorates to
work together are often missed due to misunderstandings and excessive
compartmentalisation of procurement and efficiency savings. Closer
working would be beneficial in ensuring that cost savings and service
improvement are better joined up.
• Commissioning should be provider neutral focusing on local need and the
best pathways to deliver services that meet that need.
• Commissioners need not be councils as institutions but can be individuals,
communities or councillors.
• There are a number of important questions that councils must address
when shifting to a more strategic commissioning approach, including the
extent to which council’s roles as both commissioners and providers are in
conflict, and whether ‘externalising’ provision would enable a more effective
strategic commissioning approach.
The Benefits of Strategic Commissioning
The main benefit of strategic commissioning is really the process itself. The
systematic process of understanding need, the market, performance and an
appreciation of available resources enables councils to focus on ensuring the
delivery of quality services and value to communities. However, the process
itself can also result in a wide range of benefits, including:
• Greater efficiency – By taking a provider-neutral approach to the delivery
of services, the commissioning process opens up new possibilities to deliver
services in more efficient ways, such as through shared services or by
capitalising on the benefits that the private, public or third sector can bring.
It also potentially opens up opportunities to take advantage of initiatives
such as pooled budgets, which can deliver financial savings across the
public sector. Early intervention investment such as through social impact
bonds offers another opportunity for councils to deliver long-term value for
money for council-tax payers, transferring risk and capital investment away
from local government in times of austerity, thus enabling them to deliver
value in the long term as well as the short term.
• A focus on outcomes, not processes – By studying the needs of local residents as
part of the commissioning process, and by taking a long term, locally specific
to the definition of ‘value’, councils can tailor the provision of services to
deliver the most important outcomes for residents. This might mean that some
www.localis.org.uk17
services which have been delivered for historic reasons may be delivered
in new ways to reflect changed circumstances, or in some instances not at
all. On the other hand, some services might be perceived to be delivering
more ‘value’ than was first anticipated, and there may be opportunities to
extend that service to deliver further outcomes locally. In this way, strategic
commissioning can justifiably claim to improve lives, and not just tick boxes.
• Stimulating local enterprise – By taking a comprehensive strategic
commissioning approach, councils could leverage their significant resources
and buying power to create new local markets in the provision of services,
which could create new jobs and growth, as well as the potential to drive
competition, choice and innovation in local services.
• Focus on what is strategically important – By ‘externalising’ the provision of
services, there may be opportunities to resolve any conflict in the council’s role
as both commissioner and provider of services. This may mean separating
the council’s decision making function from delivery through an arms length
organisation, for example. The benefits of such an approach may be both
cultural and practical as the leadership of the council focuses on taking a
strategic approach to delivering value for local residents.
Key Lessons
• The main benefit of strategic commissioning is the commissioning process
itself, which enables councils to think more strategically about how to best
meet the needs of local residents.
• Strategic commissioning can also result in a number of other benefits
including greater efficiency, a focus on outcomes and the stimulation of
local enterprise.
Historical Approaches to Commissioning in Local Government
Despite the popular image of an inflexible sector, slow to change, adaptation
for local authorities in the way they deliver services is not something new. Local
government has already undergone a significant transformation over the last
20-30 years, and its number of statutory duties has doubled between 1997
and 2010.20 Modern-day authorities have long been open to working with
the private or voluntary sector to ensure the delivery of public services, and
for many decades this was done sporadically and at the council’s discretion.
However, the first major shift in terms of commissioning and procurement was
when compulsory competitive tendering (CCT) was introduced through the 1980
Local Government, Planning and Land Act. For local authorities, this initially only
applied to construction and maintenance (although it was often implemented
more widely), but was extended as part of the 1988 Local Government Act to
20 See DCLG ‘Review of
also include a greater number of specified services including cleaning, refuse Statutory Duties on Local
collection, catering, grounds maintenance and vehicle maintenance.21 Following Government’, http://www.
this a series of secondary legislative instruments ensured that by 1995 CCT communities.gov.uk/statements/
localgovernment/1935018
also extended to sports and leisure, and a wide range of professional services [01/07/11]
including legal, property, financial and personnel.22 However, it is worth noting 21 See Patterson, A. & Pinch, P.L.
that CCT in professional services was not widely implemented in practice, (2000) ‘Public Sector Restructuring
due to various complications such as pre-emptive voluntary agreements with and Regional Development: the
impact of compulsory competitive
preferred contractors and local government restructuring. tendering in the UK’, Regional
Studies, 34(3), pp.265-275.
The introduction of CCT was part of the then Conservative Government’s 22 Ibid.
efforts to restructure how public services were delivered and to reduce what it
What is Strategic Commissioning?18
perceived to be unnecessary waste in local government. It has been suggested
that the Government introduced the legislation in response to limited pursuit
of competitive tendering at the local level, despite what it perceived as the
‘overwhelming evidence of efficiency gains from competition’.23 This proved to
be a controversial approach and some saw it as placing too much emphasis
on cost, at the expense of quality. Since a key component was to ensure
competition, lower bids from private contractors could not be rejected without
‘good reason’ and consequently, as revealed by research undertaken by the
Department for Environment, around 91% of contracts were awarded to the
lowest bidder in the first round of CCT. Considerations which were defined as
‘non commercial’ (such as pay rates and employee conditions) were not to be
considered as part of the decision to award a contract.24
Changing Perceptions of ‘Outsourcing’
By the early 1990s the characterisation of outsourcing was starting to evolve
from a purely transactional approach to something more collaborative. Ideas
around partnership and collaboration, although not traditionally associated
with competitive market economics, were also emerging as part of a desire to
devolve responsibility for public services from the government to private and
voluntary sector.25 In this way there was some recognition of the possibility for
and desirability of outsourcing to achieve ongoing service improvement as well
as efficiency. This trend was evident in New Labour’s ‘Best Value’ legislation,
introduced in the Local Government Act, 1999, which was supposedly a
response to the failures of CCT, but did not represent a significant challenge to
the emerging orthodoxy.26 Under Best Value, each local authority has a duty to
‘make arrangements to secure continuous improvement in the way in which its
functions are exercised, having regard to a combination of economy, efficiency
and effectiveness’.27
23 P arker, D. (1990) ‘The 1998 Local
Government Act and Compulsory Over the past several years then, there has been a discernable (if not wholly
Competitive Tendering’, Urban transformational) shift away from the traditional distinctions between public and
Studies, 27 (5), pp.654.
private/voluntary sector service provision. The standard perception that in-house
24 S
ee Patterson, A. & Pinch, P.L.
(2000) ‘Public Sector Restructuring delivery involves no external parties, and outsourcing is purely transactional,
and Regional Development’ has been eroded somewhat throughout the Best Value era.28 The rise of public-
25 F otaki, M (2010) ‘Towards private partnerships in procurement was a key feature of this. Public-private
Developing New Partnerships partnerships come in a variety of different forms, including: strategic service
in Public Services: Users as
Consumers, Citizens and/or delivery partnerships where partners each contribute a particular expertise
Co-Producers in Health and Social to some part of commissioning, procurement and delivery; Private Finance
Care in England and Sweden’, in Initiatives (PFIs), which are financially driven, and; purchasing consortia, which
Public Administration, pp.1-22.
focus more on economies of scale than delivery.29 It is interesting to note that our
26 Local Government Association
& CBI (2009) Commissioning survey indicates, when procuring services externally, 44% of councils regularly
strategically for better public take input from providers when developing tenders – with almost 41% doing so
services across local government on at least an occasional basis. Public-private interaction then, is nothing new.
(London: CBI), p.9.
27 Local Government Act 2000
PFIs in particular have attracted a lot of controversy. It is estimated that there
28 B
ovaird, T(2006), ‘Developing
New Relationships with the ‘Market’ have been over 700 PFI schemes to date, including the construction of new
in the Procurement of Public schools, hospitals and prisons.30 The National Audit Office found that although
Services’ Public Administration,
unsuitable in some instances, PFIs can provide good value for money where the
Vol.84, No. 1, p.84.
government behaves as an intelligent consumer.31 Furthermore, there appears
29 Ibid., p.85.
30 C
ave, R. (2011) ‘HM Treasury ‘in
to be no intention for the Government to stop using PFIs, as in times of economic
dark’ over ‘excessive’ PFI profits’, downturn, they can also play a role in giving the public sector the chance to
BBC, accessed at http://www. access capital. However, as an August 2011 Treasury Select Committee report
bbc.co.uk/news/
noted, it would seem that opportunities for the sector to harness its significant
31 N
ational Audit Office (2011)
Lessons From PFI and Other
spending power in intelligent ways have sometimes been missed. Further
Projects, accessed at http://www. attention will be needed in the coming years to identify and explore more
nao.org.uk [22/06/11] imaginative approaches to ensure that both public and private partners, as
www.localis.org.uk19
well as local tax payers, can derive the maximum benefits, and balance short
and long term interests. According to a survey32 performed by Ipsos MORI in
2008 81% of PFI projects had not gone through any value-testing exercise
since they had been signed. Furthermore, the survey noted that 66% of the
sampled PFI contract managers devoted less than half of their time to managing
the contract; it also noted that 42% of the contracts sampled had failed to levy
any performance deductions in the past 12 months. These two statistics point to
the crux of the problem; contract management is woefully under-resourced and
contract managers are often unaware of their rights under the contract or how
to enforce them. Public sector contractual rights are going unused, and this is
the elephant in the room; there is an expensively negotiated contract gathering
dust at the bottom of a drawer that must be reviewed to unlock and ensure full
value and excellent service for the public sector.
Towards a Joined-Up Approach
In line with this emerging outcomes focus, the last few years of the Labour
Government also saw a growing emphasis on engaging with the community in
order to identify and understand these outcomes. An important aspect of this was
developing a shared understanding of local need which partners could draw
on in their efforts to promote better health and wellbeing. The Local Government
and Public Involvement in Health Act 2007 set out the requirement for a Joint
Strategic Needs Assessment (JSNA) to be carried out by local partners with
stakeholder involvement and engagement.33 The JSNA was intended to identify
areas for priority action and help local commissioners and providers to shape
services to address these priority needs.’34 It was, in short, an attempt to recast
the user as a potential shaper.
In 2008 this emphasis on local consultation was extended to apply directly to
the procurement aspects of commissioning. The statutory guidance on ‘Creating
strong, safe and prosperous communities’ expanded on the best value principles
in the Local Government Act and introduced new duties to ‘inform, consult, involve’
local people in decision making and the duty to create a sustainable community
strategy.35 Authorities were urged to ‘co-design/work’ with ‘representatives
of local persons’ in designing policies and services, in particular relating to
commissioning. As well as the emphasis on community engagement, there was
also a strong agenda for improved partnership working across the public sector. 32 PWC (2008), Is PFI working?
This was encapsulated in particular in the ‘Total Place’ pilots, launched in 2009 Buying Excellent, Settling for
Average
which sought to explore how a ‘whole area’ or so-called ‘place-based’ approach
33 Local Government Improvement &
could deliver ‘better outcomes and improved value for money’.36 Development, Joint Strategic Needs
Assessment (JSNA), http://www.
Consequently, the first decade of the 21st century saw an emergence of a more idea.gov.uk/idk/core/page.
do?pageId=7942796
holistic approach to commissioning (including a greater focus on outcomes and
34 Department of Health (2007)
engagement), and a defined mandate for local authorities as place shapers, Joint Strategic Needs Assessment,
as part of the growing recognition of the role of public services in wider local accessed at http://www.dh.gov.
economic development.37 It also saw increased emphasis, at a national level, uk/en [01/08/11]
on notions of ‘joined-up’ government: the idea that thinking of a problem in 35 DCLG (2008) Creating Strong,
Safe and Prosperous Communities:
the context of the wider system, rather than merely in and of itself, would lead Statutory Guidance, http://
to greater efficiency across the board. It is increasingly acknowledged that www.communities.gov.uk/
investment in one area of policy can have a knock-on effect for another – for publications/localgovernment/
strongsafeprosperous
instance, housing on health, education on law and order – and commissioning,
36 HM Treasury & DCLG (2010) Total
by partially decoupling from the siloed cultures and structures of local Place: A Whole Area Approach
government, can make a telling contribution to this process. to Public Services, http://www.
hm-treasury.gov.uk/psr_total_place.
htm, p.14.
However, it is still important to note that the shift towards ‘strategic commissioning’
37 See Patterson, A. & Pinch, P.L.
has happened in the context of a move towards greater outsourcing of services. (2000) ‘Public Sector Restructuring
This explains a great deal about why the term commissioning has become and Regional Development’
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